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Tipsheet

Newsom Tried Blaming Valero for High Fuel Costs. It Did Not Go Well.

Paul Sakuma

After Democrat Governor Gavin Newsom's state Energy Commission accused Valero Energy of price gouging and ordered an "explanation" from the company on the high price of gas in California, Valero sent a lengthy letter putting Newsom in his place and explaining why his answer is waiting in the mirror. In doing so, the energy producer also exposed the true goal of Democrats' pain-is-the-point energy agenda.

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"As the Commission knows, and as countless investigations have demonstrated, market drivers of supply and demand, together with government-imposed costs and specifications, determine market price," Valero's letter begins, explaining the basics of Econ 101 since apparently Newsom missed that lesson during his time at Santa Clara University. 

The company continues to explain that it does have "planned maintenance activity underway at one of our California refineries" that is "required to keep the refinery running safely and properly and to meet the regulatory expectations of the state" that Gavin Newsom and the California Energy Commission require. But Valero explains that the company "either built inventory or arranged for additional supply to assure we meet our contractual obligations to our customers."

Continuing, the letter says that "no one has provided more low carbon renewable fuel for the California market that Valero" and adds that a "very short supply market" — due to the Biden administration's actions that ended America's energy independence — means that "inventories are pulled down to satisfy the demand" which is what the Commission expects to see. Again, due to Newsom's administration, "the closure of California refineries has necessarily eliminated their working inventories which will lower overall state inventories levels."

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As to why Californians are paying more than anyone else in America for gas, Valero then drops the hammer on Newsom and the state's Democrats:

For Valero, California is the most expensive operating environment in the country and a very hostile regulatory environment for refining. California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector. California requires refiners to pay very high carbon cap and trade fees and burdened gasoline with cost of the low carbon fuel standards. With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units. When you shut down refinery operations, you limit the resilience of the supply chain.

Boom. The cold hard truth that Newsom, Biden, and Energy Secretary Granholm know — but refuse to admit — along with the real goal of their energy-killing policies. But Valero wasn't done eviscerating California's war on energy.

From the perspective of a refiner and fuel supplier, California is the most challenging market to serve in the United States for several additional reasons. California regulators have mandated a unique blend of gasoline that is not readily available outside of the West Coast. California is largely isolated from fuel markets of the central and eastern United States. California has imposed some [of] the most aggressive, and thus expensive and limiting, environmental regulatory requirements in the world. California policies have made it difficult to increase refining capacity and have prevented supply projects to lower operating costs of refineries. 

We believe the Commission experts understand that California cannot mandate a unique fuel that is not readily available outside of the West Coast and then burden or eliminate California refining capacity and expect to have robust fuel supplies. Adding further costs, in the form of new taxes or regulatory constraints, will only further strain the fuel market and adversely impact refiners and ultimately those costs will pass to California consumers.

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That is, California's Democrat leaders aren't ignorant. They know exactly what they're doing and what it does to gas prices for their residents. As with the Biden administration's energy policies, the pain is the point. They're just blaming oil and gas companies in the meantime to try passing the buck until the energy crisis does irreparable damage. But as Valero points out, the California Energy Commission understands its role in advancing the left's radical, so-called "green," agenda.

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